Energy retailers claim AEMC’s plan to scrap power bill discounts will raise prices for all customers
A plan to abolish discounts for new energy customers faces fierce industry opposition from retailers which claim the ‘fair’ policy could paradoxically increase power bills for all customers. The AEMC says plans are impossible to compare on value.
Australia’s energy retailers condemned a recommendation to abolish discounts for new customers because it will ultimately lead to higher bills for everyone.
The Australian Energy Market Commission, which sets the rules for the national energy market, on Thursday proposed removing the ability for retailers to offer lower prices to new customers on the same plan. The AEMC said the practice in effect penalised longstanding customers who did not regularly switch providers – industry shorthand known as a “loyalty tax.” Market data shows very few households examine their electricity bill and only a fraction of customers seek out a better deal when annual tariffs are reset.
But the industry’s peak body insists the proposal, while well-intentioned, could backfire. Louisa Kinnear, chief executive of the Australian Energy Council, which represents major retailers such as AGL Energy, Origin Energy and EnergyAustralia, said outlawing such discounts would risk raising prices for all consumers.
“On the surface, the suggested change appears reasonable. But current practices reward customers who actively shop around. If the proposed changes are implemented poorly, it could result in increased prices for everyone,” Ms Kinnear said.
She said removing new-customer discounts would strip away a key incentive for households to engage and seek out value.
“This recommendation removes the benefits for customers who do engage and could in fact penalise them. It’s important that customers are encouraged to shop around, have a choice of retail products and can find the best deal for their circumstances,” she said.
The proposed changes come amid growing scrutiny of the energy sector and the drivers of rising electricity bills. Retailers privately argue that policy decisions are increasingly being framed to place the blame for higher prices on them rather than market forces.
Electricity costs in Australia have surged in recent years, largely due to global energy pressures. Prices for coal and gas used in generation have soared, and the effects continue to flow through calculations used to determine the default market offer.
The federal government has pledged a review of the reference price, an initiative the industry interprets as an effort to present customers with the impression that retailers are primarily responsible for the price rises.
Industry sources said the proposed abolition of new-customer discounts did not address the underlying causes of higher electricity bills, including wholesale market volatility and supply constraints. They said targeting retail pricing practices risked confusing consumers and undermining competitive pressure in the market.
The AEMC said the move would create a fairer system, in which all customers paid the same price on the same plan.
With the AEMC consultation period now open, retailers are expected to lodge formal submissions warning that poorly designed reforms could ultimately undermine the very consumer benefits the changes are meant to deliver.
“We envision a dynamic energy services market that delivers value, meets the preferences
of different consumers, and offers choice of energy service providers, while ensuring
lowest overall costs and building trust through targeted protections,” the regulator said.
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Originally published as Energy retailers claim AEMC’s plan to scrap power bill discounts will raise prices for all customers
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